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Acreage Decisions Under Risk: The Case of Corn and Soybeans

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  • Jean-Paul Chavas
  • Matthew T. Holt

Abstract

An acreage supply response model is developed under expected utility maximization. The resulting framework is used to specify and estimate a system of risk-responsive acreage equations for corn and soybeans in the United States. Particular attention is given to the truncation effects of government price supports on the distribution of corn and soybean prices. Also, a wealth variable is included in the acreage equations. The empirical results indicate that risk and wealth variables play an important role in corn-soybean acreage decisions. The analysis also shows that cross-commodity risk reduction is important in acreage allocation decisions.

Suggested Citation

  • Jean-Paul Chavas & Matthew T. Holt, 1990. "Acreage Decisions Under Risk: The Case of Corn and Soybeans," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 529-538.
    • Handle: RePEc:oup:ajagec:v:72:y:1990:i:3:p:529-538.
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    1. B. Wade Brorsen & Jean-Paul Chavas & Warren R. Grant, 1987. "A Market Equilibrium Analysis of the Impact of Risk on the U.S. Rice Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 733-739.
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